44 Comments - Robert the Bruce - Friday, Aug 1, 14 @ 9:17 am: ==And I’d bet big money that satisfaction with Walgreen’s is a whole lot higher in this state than it is with Gov. Quinn. I just don’t see a win here.== Hmmmm….can I change my vote to make it 64-36? - OneMan - Friday, Aug 1, 14 @ 9:21 am: The neighborhood pharmacist going away is an interesting idea, more so because I am in my 40s and grew up in the suburbs and the neighborhood pharmacist kind of went away where I grew up in the 70s. Where I live now, construction 30 to 40 years old, there was never a ‘neighborhood’ pharmacist. I can say that relative to OneMan central the two entities that have their second facility closest to my house (that is I encounter two of them before two of anything else) is CVS and Walgreens (heck there are three Walgreens near me if I include the one at the Hospital) before I get to my second Starbucks. Also AA is right about older folks being loyal to their pharmacists in general. - Ahoy! - Friday, Aug 1, 14 @ 9:21 am: –allegation made earlier in the thread that Walgreen’s has forced local pharmacists out of business…– I would like to add that the State of Illinois has put more local pharmacies out of business with their payment cycle than any corporate pharmacy. - Modest proposal - Friday, Aug 1, 14 @ 9:23 am: I voted that Quinn should keep up the pressure. I should have explained this vote though. As a rauner supporter, the bumbling and rambling of Quinn on this issue will create an opening for rauner to pounce on. As Quinn’s campaign manager I wouldn’t advise him to keep up the pressure - Mason born - Friday, Aug 1, 14 @ 9:27 am: Both A Guy and AA are right. No one wants to see Walgreens leave but to claim that somehow they have been beasts in this is a stretch. At some point the Corporate tax rate in the U.S. has to be looked at. In the end Walgreens has a duty to their shareholders to maximize returns and minimize expenses. - Gooner - Friday, Aug 1, 14 @ 9:28 am: With regard to the fondness for Walgreen’s – It is possible, but personally I don’t see it. My insurer (for whatever strange reasons matters to health insurers) made me switch prescriptions from Walgreens to CVS. If there is a difference between the two, I haven’t seen it. If every Walgreens was taken over by CVS (or the opposite), I’m not even sure I would notice at all. - A guy... - Friday, Aug 1, 14 @ 9:32 am: I’m going to ask Toni Morrison to do a biography on me and Jonathan Demme to adapt a film. I’ll never be as “Beloved” as Artie A. but being mentioned in the same article is flattering no matter how you slice it. To the post: Walgreens is like family to many neighborhoods and communities and they’ll get the benefit of the doubt from a high percentage voting bloc. In the meantime, I’ll work on being more lovable. lol. - Oswego Willy - Friday, Aug 1, 14 @ 9:34 am: Two really insightful and thoughtful comments. To those; - AA -’s comment struck me in the “home” aspect. My “older” relatives call it “Wally-Greenie’s” and with multiple visits a week, they know the work shifts of who is filling their prescriptions on any day they go. It’s a ritual like going to the doctor, or seeing a physical therapist. If “Susie” or “Johnny” is filling the bottles, that is the only thing they really need to know. - A Guy… -, comes at it from a pragmatic angle I really think get to the heart of the economic realities of neighborhoods and who serves them. City neighborhoods and small towns alike face the problem of “who is local” to serve their needs?”. In the city, if you have to take two buses or go 3 “el” stops for a grocery store or pharmacy, how good is that? Small towns that have to drive 8-10 miles to the next town for goods or medicine doesn’t make it easy in rural areas. “Wally-Greenie’s” has done a great job being where they are needed, being part of the fabric of families’s lives, and seen more as a local friend with a friendly face than a faceless corporation with accounting issues that you need someone to explain with the bottom line being, “your experience at Wally-Greenie’s won’t be any different”. In reality, the neighborhoods and towns, that’s all they are concerned with day to day; be where you have always been, and help us like you always have. The customers know “Susie” or “Johnny” but can care less who is going the restructuring for unknown money people. Great points by both, well said. - CircularFiringSquad - Friday, Aug 1, 14 @ 9:35 am: Headline– “Flip Gives Straight Answer” That is a hoot. So he did not care,have referendum, make IL competitive” Keeps the streak in tack that he has changed on every position in this campaign. BTW “make competitive” is code for put up the welcome sign for sloppy doctors and manufacturers, kill the unions and pile up the give aways. Portraying Walgreens as a tax cheat/dodger might open some eyes. They do have a lot of stores, but they are not cheap - Under Further Review - Friday, Aug 1, 14 @ 9:41 am: An advisory referendum question on whether or not the corporate headquarters of Walgreen pharmacies should remain in Illinois is being readied for the November ballot as we read this post! - Econ101 - Friday, Aug 1, 14 @ 9:45 am: Saving on taxes, both Federal and State, will allow for lower prices at at the stores. Lower prices means more customers. It’s simple supply and demand…something many Illinois people seem to forget - Gooner - Friday, Aug 1, 14 @ 9:56 am: Interesting Econ101. Do you have any evidence to support the claim that there is a real elasticity of demand for prescriptions? Are people passing on heart medication because the price is too high? Moreover, are you claiming that if taxes are lower, Walgrees will respond by reducing prices, as opposed to, I don’t know, maybe increasing salaries for execs? Econ101, you seem to be making a lot of assumptions as to how Walgreens (and consumers) would act, but I don’t see a lot of support for those positions. - Ducky LaMoore - Friday, Aug 1, 14 @ 9:57 am: @Econ101 Yes, because the first thing a company does with more profit is cut prices!!! Ha!!! - North Shore Joe - Friday, Aug 1, 14 @ 9:58 am: =I know a number of seniors who are as close to their pharmacist as they are to their doctor, and they love Wally’s. They might not understand inversion, but they understand messing with their pharmacy and they won’t like it.= I don’t think people would easily confuse an attack against Wall Street greed vs an attack on Joe Pharmacist who is a cog in the billion dollar corporate wheel. Silly thought process here. Couldn’t disagree with you more here, you guys. - Rich Miller - Friday, Aug 1, 14 @ 10:03 am: NSJ, people generally think in pretty simplistic terms. And they connect things to what they most readily know. So, an attack on Walgreens is an attack on what they know, the stores and the people who work there. If this sort of thing worked, WalMart would’ve gone outta business years ago. - Skeptic - Friday, Aug 1, 14 @ 10:03 am: I see the losses of local pharmacies as just another facet of this country’s move to Big Box, like the grocery stores, hardware stores and electronics vendors. I also agree with Ducky, cutting taxes doesn’t necessarily equal lower prices (same goes with cutting wages.) - PublicServant - Friday, Aug 1, 14 @ 10:08 am: People are, some more than others, attached to their pharmacist. They’d still be attached regardless of where they worked. I have three friends and neighbors who are pharmacists. They bounce between CVS, Walgreens, hospitals etc all the time. I think seniors are smart enough to understand a corporate tax dodge, and not confuse that fact with someone trying to hold that corporation’s feet to the fire, regardless of where their favorite pharmacist works currently. - A guy... - Friday, Aug 1, 14 @ 10:21 am: Walgreens greatest competitor is the independent pharmacists with a stranglehold on their customers who adore them. Their strategy for decades has been to wait them out until retirement and give them a very generous offer when they’re ready to ride into the sunset. And it’s worked! Competing with CVS is an easier strategy equation for them. That local pharmacist keeps people from shopping anywhere else; internet or big box, because in essence it’s like “cheating” on them. Many people follow their pharmacists around like hair dressers. Walgreens has done an amazing job of adopting those folks. Smart. Very smart. - 47th Ward - Friday, Aug 1, 14 @ 10:22 am: ===I just don’t see a win here.=== I agree that both AA and A guy made very good points and are probably right. Having said that, I’ll stick to my response yesterday and elaborate a bit. First, this corporate inversion is a tax dodge, plain and simple, whether it’s Walgreens or another company doing it. People understand exactly what is happening and I don’t think they like it too much. Second, attacking these companies over this practice is standard Populism 101, right out of the Pat Quinn playbook. It complements one of the themes he’s developing against Rauner, and it’s an easy pivot back to Rauner not paying Social Security taxes. So it’s not a stretch to say Quinn is decidedly on-message with this line of attack. Finally, this gives Quinn something newsworthyish to talk about that he has no control over and doesn’t have anything to do with his record over the last 6 years. Remember, this is the guy who is pushing an assualt weapons ban, a minimum wage hike, and a referendum affirming the right to birth control in health care coverage. None of these are “real” issues, like Walgreens, but all of them give Quinn a populist social issue to beat like a drum. As I said, it may not be a good strategy overall, but it makes some sense for Quinn to not only raise it, but to keep it up for a while, at least as long as it’s in the news. - North Shore Joe - Friday, Aug 1, 14 @ 10:22 am: Rich, I think most people are pretty easily able to separate attacks on corporations and attacks on its workers. How many times have you heard “it’s not their fault, they just work here.” Also, I think people can separate desired societal and economic conditions (Main St., independent shops etc) vs. Prospect Ave. (Champaign) big box stores etc. versus doing what they have to best provide for their family, even if that means shopping at Wal-Mart. I’m not one to underestimate the ignorance of the public when it comes to going-ons, but large themes like that…. people get. Especially the ones tuned in enough to follow this controversy. - Abe the Babe - Friday, Aug 1, 14 @ 10:29 am: ==NSJ, people generally think in pretty simplistic terms. And they connect things to what they most readily know. So, an attack on Walgreens is an attack on what they know, the stores and the people who work there. == You really think people cannot distinguish the service they get from their local pharmacist from a public scheme to avoid taxes by the empty suits at corp. HQ? Wow, that’s not a lot of faith Rich. And people go to walmart for the price not the service. People rarely have a relationships with walmart employees. I don’t know that I even interacted with one the last few times I went in. - VanillaMan - Friday, Aug 1, 14 @ 10:29 am: Rauner’s answer is finally correct politically. It is meaningless drivel, but at least he isn’t sounding like it is Quinn’s fault Walgreens needs to leave Illinois. Walgreens outgrew Illinois after their European merger. They are now a global player in a bigger way than they ever have been. This requires that they reorganize to satisfy their new objectives. Quinn is in over his head on this. He has no ability to alter US taxes in Congress. He has no ability to stop Walgreens from their merger with Boots. After Rauner blew it with his silly canned tax crap this week, Quinn should have been sharp enough to make Rauner look like the blithering boob his canned answer on Walgreens was. Instead Quinn blew it even bigger by accepting the argument as fact and then going after Walgreens as though they were heartless monsters. Not smart. Rauner’s error gave Quinn an opening, but instead of taking it and scoring for his reelection, Quinn lost his mind and went demagogic over an issue that was framed wrong. Can anyone play this game? Geez! Rauner is right. Quinn is not. Worse, Quinn is floundering in politibabble. Talk about being a Gadfly! Stop it Governor. Get a grip. Show everyone that you can play this game in this league by demonstrating that you have an inkling on what happened here. You are embarrassing yourself. - Econ101 - Friday, Aug 1, 14 @ 10:29 am: Gooner. Why every time I talk to one of Illinois’ bleeding hearts I hear all about how people cut back on needed prescriptions because of the cost. Perhaps you haven’t had your ears open. None the less Walgreens sells much more than prescriptions in its stores. I am not sure of the exact numbers but in the stores I have visited I observed many customers not buying prescriptions at all. The stores are conveniently located and since a firm will operate till its marginal revenue equals its marginal cost I have every reason to believe that Walgreens will pass the savings on - ChrisB - Friday, Aug 1, 14 @ 10:34 am: My vote was definitely sarcastic. Harp on the subject, and you risk pointing out Durbin’s inaction on the slow moving train wreck. If and when Walgreens does move, all Quinn can do is shake his angry fist at them, because again, this is really a federal issue. It really pounds home the message that Quinn is all talk and little thinking. On the other hand, it’s a populist message, and it may fire up the base. So damn the facts, and charge straight ahead. - walker - Friday, Aug 1, 14 @ 10:41 am: Econ 101: to think that retail prices are primarily set by a company’s operating costs, ignores Econ 1. You know better. - VanillaMan - Friday, Aug 1, 14 @ 10:42 am: this corporate inversion is a tax dodge, plain and simple Walgreens merged and became a European player big time. Shifting into the European market requires taking advantage of their new international business goals. They have new European stockholders. They ain’t just American anymore. So they are not merely doing a paper shuffle to avoid US taxes. Walgreens is not the right piñata to beat on this issue. Go ahead and make tax inversion an issue - just find a real example of it. That isn’t Walgreens! Walgreens will still be paying US taxes. It will still be paying Illinois taxes. What it won’t be doing is moving their new international business model into the US. I don’t recall many complaints when Willis bought Sears Tower. Willis isn’t US. It is British. They got here through mergers with US insurance corporations. Chrysler got bought by Fiat out of Italy. These things happen. Quinn needed to see that Walgreens was not the piñata he wanted to find to make this an issue in the election. Consequently, he looks ill-informed and political. - Gooner - Friday, Aug 1, 14 @ 10:44 am: Interesting Econ. What I’ve noticed for most companies (including my own I freely admit) is that companies will keep prices high as long as people keep buying. Walgreens will reduce prices when it has to because of CVS. They sure will not do it just because they get a tax cut. - wordslinger - Friday, Aug 1, 14 @ 10:45 am: Walgreens U.S. management didn’t go international to do this inversion dodge. It’s not their style, at all. They just wanted to write scripts for the aging European population. Over the decades, Walgreens built a brand as the all-American good corporate citizen that is far more valuable than any quarterly report bump from a hocus-pocus tax dodge. But they have new partners now, Europeans who aren’t in for the long haul, but are looking to score and get out. The long-term hit to the brand equity means nothing if you’re in for the short term. There’s no way in the world if members of the Walgreen family were running the board that they’d ever risk being called unpatriotic or slippery by anyone. It would contradict everything they worked to build. - Yellow Dog Democrat - Friday, Aug 1, 14 @ 10:47 am: I recommended lightening up on Walgreens and keeping the attention on Rauner where it belongs. Rauner clearly opposed Durbin and Obama’s effort to hold corporations accountable for sending jobs overseas to get tax breaks. At the same time, while there is much to praise about Walgreen’s, it is largely an insider’s view. Local residents may feel gratitude when a business opens, but that gratitude wanes in due time. Especially when that retailer charges $9 for a pack of Uno cards. Goofs like this are rare in a campaign. How well is Quinn capitalizing on it in the first 24 hours? Where are his surrogates? Are social media and digital news jammed with angry mobs? Another good reason for Quinn not to attack Walgreens and accuse them of being “unpatriotic”? He took their Money. Lots of it. Pretty recently too. So, when McKinney calls you and asks you if you are returning the cash, what do you say? - OneMan - Friday, Aug 1, 14 @ 10:49 am: Gooner, My wife deals with this as a medical professional who works with older folks and who used to talk to pharmacists all the time. The loyalty to a pharmacy is fierce. That is part of the reason WalMart started offering those really inexpensive prescriptions for common meds, because once someone starts going to a pharmacy they keep going and will often buy other things. It’s also the reason why the Mariano’s that went into to Dominick’s by me kept the pharmacy open during the remodel. It’s a bit like how people may love the idea of term limits and hate the legislature but love their state rep. - Gooner - Friday, Aug 1, 14 @ 10:54 am: Interesting, One Man. You may be right, but I hope not. I was thinking that old age would include a lot of “THOSE KIDS WON’T GET OFF MY LAWN!” Now I realize it may also include “AND WHATEVER HAPPENED TO THE GOOD OLD DAYS WHEN WE HAD WALGREEN’S!” So I’ve got that to look forward to. - 47th Ward - Friday, Aug 1, 14 @ 10:58 am: ===So they are not merely doing a paper shuffle to avoid US taxes. Walgreens is not the right piñata to beat on this issue. Go ahead and make tax inversion an issue - just find a real example of it. That isn’t Walgreens! Walgreens will still be paying US taxes. It will still be paying Illinois taxes.=== Do you ever get tired of being wrong VanillaMan? From the Wall Street Journal: “But an inversion would facilitate ways to reduce Uncle Sam’s cut through so-called income-shifting transactions. Walgreen’s U.S. business, for instance, could take on much of the company’s debt, and the interest would lower its taxable income at home. Alternatively, the U.S. business could pay a fee to its overseas parent corporation for management services.” http://online.wsj.com/articles/walgreen-weighs-riding-tax-inversion-wave-1405453698 - VanillaMan - Friday, Aug 1, 14 @ 11:08 am: An inversion will reduce their US taxes, but claiming that they are moving overseas in order to do that is wrong. Walgreens merged in order to tap into a global market. Your argument is like claiming that the widow killed her husband in order to get the insurance money, because she is getting insurance money. - wordslinger - Friday, Aug 1, 14 @ 11:10 am: Unlike some companies, Walgreens U.S. management didn’t go international for the express purpose of the inversion tax dodge. They wanted to write scripts for the aging European population. But their new partners have other ideas. They’re deal-makers; they’re looking to score and get out, and aren’t worried about any long-term hit to the brand equity. That’s what’s sick here. Walgreens has spent decades building themselves as the all-American good corporate citizen. And they walk it like they talk it in many, many ways. They spend tens of millions every year building and maintaining that corporate image. You can fill your scripts anywhere; the goodwill Walgreens has built over the decades is their value. Those who yammer on about “fiduciary responsibility” and “maximizing profits” are afflicted with quarterly-report-bump sickness, and don’t understand long-term value. The heat they are taking now is a direct hit on their brand equity. That’s the kind of bad publicity money can’t buy. The inversion is being driven by the European dealmakers. There’s no way in the world that if there were Walgreens family members on the board that they’d ever risk being called unpatriotic or slippery over some tax scheme. It’s really not worth it in the long run and harms what they’ve built over the years. - ChrisB - Friday, Aug 1, 14 @ 11:11 am: Guys, stop picking on Econ101. It’s not his fault Profit Maximization isn’t taught in the intro class. He’s still trying to work the shifts in the S+D curves. To the post, US Tax code taxes revenues made in foreign nations. We are the only OECD country that does this. For example, there’s a transaction in Ireland. It is taxed at X% in Ireland (I don’t know the tax rate there). The US then asks the company, when they bring the money to the US for 35%-X%. All US transactions are still taxed at the 35%. So companies don’t bring their money here until there’s a tax amnesty period. There are literally piles of cash in offshore accounts waiting to come back to the US. Suffice to say, this is not efficient for anyone. Serious question though. Does IL still tax these overseas transactions? As in, do they get a cut of the difference between the overseas tax rate and the state tax rate? My guess is no (Or the difference is miniscule), and therefore another reason why it’s silly for either candidate seeking the state office to get involved. There are enough people already banging that drum. No need to join the circle if it makes you look like you don’t know what’s going on. - Grandson of Man - Friday, Aug 1, 14 @ 11:15 am: Rich and others, I too love Walgreens and shop there all the time. I just think that Walgreens’ HQ leaving America is unfair because the corporation benefits greatly from our tax dollars via Medicare and Medicaid, and from our large consumer base. Plus, Walgreens will pay less for federal government services while reaping full benefits from them. The rest of us will have to make up the difference. Why doesn’t Walgreens stay here and fight for tax reform instead of bailing? I may shop at Walgreens less or boycott it outright if HQ leaves. The American top corporate tax rate may be among the highest in the world, but is it not historically low in this country? If so, the move would to me be race-to-the bottom-y. Corporations would pay even less, and we’d be stuck with the rest. - 47th Ward - Friday, Aug 1, 14 @ 11:31 am: ===but claiming that they are moving overseas in order to do that is wrong.=== Did you even bother to read the WSJ article? - 47th Ward - Friday, Aug 1, 14 @ 11:38 am: I’ll make it easier for you VMan, here’s more from the July 15, 2014 article you obviously didn’t read: “Minimizing taxes wasn’t part of the formula when Walgreen bought its first stake in Alliance Boots in 2012. Mr. Wasson touted the deal as one that would give Walgreen greater global exposure as domestic sales were slack, and that the combined companies would have greater heft when it came to purchasing generic drugs. Analysts didn’t press for details on the tax structure during a conference call to discuss the deal on the day it was announced. But the issue picked up steam late last year as investors started pushing for a move. Walgreen dismissed the idea as recently as March, when Mr. Wasson, the chief executive, said the company wasn’t considering an inversion. But the following month, investors including hedge funds Jana Partners, Corvex Management LP and Och-Ziff Capital Management Group OZM LLC met with Mr. Wasson, Walgreen Chief Financial Officer Wade Miquelon and Alliance Boots Chairman Stefano Pessina in Paris to ask them to reconsider. Walgreen warmed up to the idea soon afterward, culminating in Mr. Wasson’s declaration on last month’s earnings call that the company is “looking at all and everything.” “The likelihood went up dramatically,” Jefferies analyst Mark Wiltamuth said of the odds of an inversion for Walgreen. “The only reason you consider timing and structure is because you are clearing the path for conversion.” It’s a tax dodge, plain and simple. - Yellow Dog Democrat - Friday, Aug 1, 14 @ 11:53 am: Well said, 47th Ward. But again, as I said: Walgreens isn’t Apple but it isn’t Exxon either. Their brand is somewhere in the middle. Quinn should be calling Rauner anti-American for supporting the company’s move to Switzerland, not attacking Walgreens head-on. I would agree too that Walgreens has some plays here to try to make some lemonade. - Jimbo - Friday, Aug 1, 14 @ 1:39 pm: I”ve said something like this many times, but I’ll say it again. This whole thing isn’t about Quinn ripping Walgreens because their bad. He’s demonizing them for a practice nearly everyone finds reprehensible. I think there’s a method to his madness here. It might be as small of a thing as drawing comparisons between this and Rauner utilizing tax avoidance schemes, OR it might be because Rauner has used inversion himself with companies he owned. I don’t believe this is simply Quinn trying to score some populist points. If it is, he should stop, but I think there’s more to it. - Arthur Andersen - Friday, Aug 1, 14 @ 2:51 pm: Thanks for the props, Rich. 47 and YDD, the irony meter needle does twitch a little when you drill down and see that big hedge funds.were in there lobbying for the inversion, eh? - Yellow Dog Democrat - Friday, Aug 1, 14 @ 3:09 pm: Mr. Andersen - What I find most ironic is Jana, whose motto is “Ignore the crowd,” taking a company like Walgreens that has been praised for its disciplined long-term business strategy, and turning away from that strategy to try to earn a fast buck just like everybody else. - Responsa - Friday, Aug 1, 14 @ 3:39 pm: Gov. Quinn’s assumption that he has both the knowledge or the right to threaten and to pass judgement on business operations and financial matters of a respected private international company, including how they choose to organize themselves, disgusts me more each day it goes on. He can’t even run his own administration but thinks he has the judgement and acumen to tell Walgreens how to conduct and stay in business? - Responsa - Friday, Aug 1, 14 @ 3:52 pm: And for all the “I’ll decamp to CVS and take my business there if Walgreens closes its IL Corp HQ” people, maybe somebody could do some solid research on how many dollars in taxes Walgreens has paid here in over a century compared to recent newcomer CVS. That might be instructive. Sorry, comments for this post are now closed.